Here's our summary of key economic events overnight that affect New Zealand, with news that trade seems to be rising, and driven by an expanding Chinese economy.
China has posted an enormous trade surplus in November. It hit a record +US$75.4 bln, compared with a US$58.4 bln in October and analysts has expected a +US$53.5 bln surplus. Their exports were up an impressive +21% in November compared with the same month a year ago, and their imports were up +4.5%. The politically sensitive surplus with the US was up to +US$37.3 bln and representing half the overall result. China ran a -US$412 mln deficit with New Zealand in the month. And with Australia, their's was a -US$3.8 bln deficit with imports from Australia falling -4.9%.
China’s foreign exchange reserves rose by more than +US$50 bln in November to the highest since August 2016, boosted by the weaker greenback and a trade surplus at record highs. They now stand at +US$3.2 tln or about 20% of China's GDP. Their gold assets fell to US$110 bln or only 3% of their total reserves.
Taiwan's trade surplus didn't grow like China's, but the country also posted a very good year-on-year rise in exports (+12%), and this was almost matched by an equal rise in imports (+10%).
Aircargo volumes are rising as well. In fact cargoes into North America are now higher than for the same November month a year ago. Domestic aircargo there is up even more strongly. And while they are still well behind year-ago levels, aircargo volumes in the Asia Pacific region are on the upswing. In fact, the same is even true in Europe. Unfortunately, this is an expensive recovery because the subsidising passenger travel levels are still dormant and aircargoes have to pay their full way.
In Australia, the RBA seems to have concluded that the BuyNow, PayLater schemes of enforcing a no-surcharge rule on their merchants works to "promote innovation", and that these benefits outweigh the harm the sector does to some users. But they do note that at some point, no-surcharge rules will need to be unwound.
And S&P has downgraded the credit ratings for the states of NSW and Victoria, dropping them both from AAA status to AA+. That aligns them with both Western Australia and Queensland, and ahead of South Australia's AA rating. Perhaps these downgrades signal that Australia could be about to lose its AAA rating?
In Europe, the final Brexit talks are underway and there is not an air of optimism surrounding them, even as the UK has backed down on its threat to rip up some key prior agreements. It is the eleventh hour and still no substantial blinking by either side.
To start the week, Wall Street has opened lower, down -0.2% in mid-day trade. Overnight European markets closed slightly lower again. They both followed Asian declines. Yesterday, Tokyo closed down -0.8%, Hong Kong closed down -1.2% and Shanghai was also down -0.8%. However, the ASX200 ended up +0.6% and the NZX50 Capital Index ended up +0.2% at their respective closes.
The latest global compilation of COVID-19 data is here. The global tally is 67,250,000 and a +476,000 rise in one day. It is still very grim in Russia, the UK, Brazil, Turkey and Indonesia. It does seem to be easing further in Europe generally. Global deaths reported now exceed 1,540,000 and up a very sobering +7000 in a day as death rates spike everywhere.
But the largest number of reported cases globally are still in the US, which rose +181,000 overnight to 15,193,000. The US remains the global epicenter of the virus. The number of active cases is surging and now at 6,030,000 and that level is up +97,000 in just one day, so many more new cases more than recoveries. The rise in 'active cases' by about +100,000 in one day is being normalised. Hospitalisations are becoming a very major concern, as are reinfection rates. Their death total now exceeds 289,000. The US now has a COVID death rate of 871/mln, similar to Argentina.
In Australia, they are not getting any resurgence. There have now been 27,972 COVID-19 cases reported, and that is just +7 more cases yesterday. Now 42 of their cases are 'active' (-2). Reported deaths are unchanged at 908.
The UST 10yr yield will start today softer at 0.93% and a -4 bps reversal. Their 2-10 rate curve is marginally flatter at +79 bps, their 1-5 curve is also flatter at +29 bps, and their 3m-10 year curve is also flatter too at +86 bps. The Australian Govt 10 year yield will start today down -2 bps at 1.04%. The China Govt 10 year yield is unchanged at 3.32%, while the New Zealand Govt 10 year yield is up +5 bps at 0.96%.
The price of gold is up solidly today, gaining +US$27 to US$1865/oz or +1.5%.
Oil prices are unchanged at US$46/bbl in the US, while the international price is still just on US$49/bbl.
And the Kiwi dollar has firmed marginally to 70.6 USc and off its recent highs but at a similar level to a week ago. Against the Australian dollar we have weakened slightly, back to 94.8 AUc. Against the euro we are unchanged at 58.2 euro cents. That means our TWI-5 is still at 72.6.
The bitcoin price has changed little since this time yesterday, now at US$19,232 but that is another +0.6% gain in a day. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
22 Comments
Half of that Chinese surplus is probably sitting aboard ships lined up in the Hauraki Gulf waiting to unload. Still it's the time of year buy tat for people so they they can keep landfills busy and children in Asian sweatshops employed. A celebration of capitalism at its finest.
https://www.bloomberg.com/news/articles/2020-12-06/water-futures-to-sta…
“This may not solve that problem entirely, but it will help soften the financial blow that people will take if their water supply is cut off.”
Therein we see the flaw in economics.
Easier to install tanks than to put up hydropanels in remote locations that use solar energy to extract water vapour from the air.
Plenty of public grant money going to for-profit, 'public benefit' startups to bestow the power of harnessing the sun onto the natives living in Navajo nation.
https://www.goodnewsnetwork.org/hydropanels-at-navajo-homes-take-much-n…
You would have to be paying a hell of a lot for water to make raintanks more economic than mains water. You're looking at about NZ$10K for 10KL storage by the time you have paid tanks, pump, mainswitcher, installation, rerouting all your downpipes, council building consent.
How much is water /kl in california?
Blimey, hope the Christchurch City Council doesn’t read that. If they can commit $45 mill of rate payer’s money to a pie in the sky airport in Central Otago heaven knows what they might conjure up with futures for the wonderful Canterbury artesian water. Oh hang on, that is already being bottled up in pure form for free and sold in China for profit while the Christchurch people drink the chlorinated type.
We need to monopolise the water bottling business with SOEs paying hefty royalties to local councils and our central government for bottling water in regions with surplus (West Coast, Southland, etc.).
Clearly, productivity isn't our thing - when milk prices tanked in 2014-15, we doubled down on migration and housing. Now that migration has halted, we're all in on housing.
We Kiwis love our 'get-rich-quick' schemes; what better way to achieve our dream than to become the Saudi Arabia of water.
You know, surely this issue would be an ideal platform for The Green Party to lobby the government hard, and win some support whilst at it. Organisations don’t extract coal from the ground for nothing and export it. How come our water can be then. If existing water rights for industrial use can be distorted into allowing bottling then legislate to stop it. Think 99.9% of NZrs would be on board with that. Where exactly are the Greens when you need them then.
A new survey shows ten per cent of New Zealand households are earning more now than they were before Covid-19 hit. Two-thirds were earning the same or more than they were in February.
Those who were earning more were more likely to be “knowledge workers” or public sector employees
https://www.stuff.co.nz/business/money/300177355/ten-per-cent-of-new-ze…
“Households in the exposed segment have increased their saving levels, which suggests some of them realised the precarity of their financial situation,” she said. “We need to encourage them to keep going so they are better prepared for the next financial shock.”
If the RBNZ cuts interest rates in half again, they will have to double their savings to fund the same liability outflow costs.
Wheels falling off in UK
https://wolfstreet.com/2020/12/07/three-big-retailer-casualties-in-one-…
Heading to Twizel with cyclists, both had weekend off bikes one did a half marathon and my daughter climbed a mountain, now have sore muscles with not a lot of sympathy from me.
Cattle market is soft, back over .20 c a kg last week,bi don't like losing $100 a head in a week.
Talked to sports shop owner who said they put in orders for 2021 stock but now looking like it won't be able to be delivered, need a refund got their fingers crossed.
My daughter was told to order bike parts as they going to run out of stock.
More interesting times ahead.
If you go into Jakes Hardware in Twizel, they have a pretty good selection of bike parts, I also think if you go into most bike shops around the country, they have plenty of bikes for sale, very few road bikes, but that's not the market at the moment. Shimano bike parts are being airfreighted in instead of ship, and they are arriving a month or two late at the moment. Your daughters comment about they will run out is past tense, they ran out a couple of months ago, and have been in catchup mode ever since, stuff is coming in now.
China's trade surplus rose and therein lies the seeds of a problem for NZ at some point. We can see very clearly what can happen when you upset China and an issue is bound to arise when we can no longer sit on the fence.
Will we choose trade over principle? It's not a decision I would like to make but if i was an exporter, I would be trying very hard to find other markets. When i became a partner in a firm in 1984, 2 clients accounted for almost 30% of our business and we made strenuous efforts over the next 5 plus years to whittle that down and got it to under15%, with which we comfortable.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.